Recently, one of our new customers asked us to help them model their startup in Farseer. What’s interesting about the model is that all of their revenues had to be divided between them and their partners. Sounds familiar? If you’re part of the startup scene, you’ve probably heard of something similar. As revenue sharing model is relatively common, we decided to create a simplified tutorial for all of our readers who might need something similar in the future.
First of all, let me explain the basics of the revenue sharing model. The most common example of it is a situation where a startup company has a partner who helps them with their business venture in a certain way – providing sales channels, acquiring new customers, opening new markets etc. The partner strikes a deal with the startup that all revenues will be shared in proportions to their overall effort in day to day activities – which, in this case means that they are due 25% of the revenues.
It’s actually quite simple.
As always, there are several ways to model this in Farseer. All of them are pretty simple, so I chose the one that gives us more space for additional analyses. The hierarchy model I’ll be working with is a basic showcase example of a SaaS startup business model. I’m not going to explain all the intricacies of the model now, because that will be the topic of a future post. Apart from building the company hierarchy model, the entire process can be finished in 10 minutes, tops. Let’s start!
Step 1: Building a company/project hierarchy
The example I used here is a small startup company called Software Inc.
They offer their software through a SaaS platform, which means they charge their customers monthly subscriptions. In this scenario, they have 3 plans – Free trial ($0), Basic ($20 a month) and Pro($100). Additionally, they have a fourth option – a customized Enterprise plan, for customers that need some additional features developed. The price for the Enterprise plan varies from user to user.
Step 2: Creating helper flows
Helper flows are very cool because they can be used to make complex calculations easily, and their data won’t be added together (consolidated) with other data. (You can read more about flow types here). So, our task here is to create 3 new flows, one for each plan. We’re going to place the newly created flows in the Revenues cluster. (more on this in the 4th step).
We’ll create two more: Partner Revenue Share – Pro and Partner Revenue Share – Enterprise. Our free trial plan will not be included here because it doesn’t generate any revenue, so there’s nothing to calculate revenue-wise. After finishing this, it’s time for the next step.
Step 3: Create custom flow expressions
Now, it’s time to create custom expressions – formulas. They’l help us to calculate the percentage of revenues that needs to be allocated to the partner company. Their “cut” represents 25% of all revenues. So, the calculation will be pretty simple – we’ll multiply the data in clusters for all plans by 25%. To do that, we need to select the flow in which we want to see the new data, select the expression tab in the flow toolbar, and write the expression. You can see how we did it for the Basic plan (cluster) in the example below.
The expression editor has a neat autocomplete feature – you can click on an element to insert it in the expression. In this case the calculation is simple – it’s just the original cluster multiplied by 0.25
Afterwards, we simply do the same for the other two plans (Pro and Enterprise).
Step 4: Share the data with our partner
So, now we have the numbers, but the entire point of calculating is to share them with our partners. We can export the data to Excel and send the file to our partners, but it’s way more efficient to create a new Farseer user for them, and giving them 24/7 access to the project (or at least the part of the project they need to see). We put all of the revenue data in one cluster, so our partners can see everything in one place.
You can assign a cluster to a user simply by dragging and dropping
Every time they log in, they’ll see this:
We only gave our partners the Read permission, which means that they’ll see all data in the Revenue cluster, but they won’t be able to make any changes. This is fine, because they don’t need to be included in our day to day activities. Also, they won’t be able to see the rest of our hierarchy at all, unless we give them the permission to do so.
As I mentioned earlier, this example in this post is somewhat simplified, but it shows that you can easily create complex business cases. There are lots of variations of the model we created here, some of which can seem more challenging to reproduce, but they don’t necessarily are. If you want to make something similar (or totally different, for that matter) you can always contact us. We’re really excited about helping creating new business models, and solving planning problems.